Real Estate Investor Magazine South Africa July/August 2019 | Page 32

RESIDENTIAL
Local property
investment
Our ultimate short checklist
for property investment
BY KYLE BATH
P
roperty Assist has provided the ultimate short checklist
for property investment, providing insight for potential
investors in property.
KEY POINTS TO LOOK AT BEFORE
INVESTING IN PROPERTY
1. LOCATION
Research the area and the current status of the area
Determine demand and current trends in the area
New developments, roads and spatial plan of the area
must be taken into consideration.
2. REVIEW NEW OR CHANGING LEGISLATION
3. ASCERTAIN THE CURRENT POSITION IN
PROPERTY CYCLE
4. PROPERTY DUE DILIGENCE
Ensure that a structural property inspection is carried out.
Plan Scrutiny: Plans in line with the current structure
build on the property.
5. PROPERTY OWNER DUE DILIGENCE
6. PURCHASE PRICE OF PROPERTY
Consider doing a property assessment by area specialists
Look at the suburbs actual sales
Comparable properties for sale
Registered valuations.
7. CONDITION OF PROPERTY & COST OF
REPAIRS
Maintenance quotations
Compliance certificates and quotations must all be
taken into consideration.
8. RATES CLEARANCE AMOUNT
9. COPY OF TITLE DEED FOR RESTRICTIONS
10. RESEARCH INVESTMENT RISK & RETURN
Find out the Return on investment
Risk rating in relation to exit plan and property security
DO’S & DON’TS WHEN INVESTING
Do not let greed or fear drive you during your
investment process
Do not buy emotionally – it’s an investment, not your
home you going to live in. Many investors are driven
by the question if they will live there, however this is
not important but rather whether there is a demand
for property in that area and what the price range is.
Do not buy because your friend said so without doing
the research yourself!
Do not buy without reading the contracts and
other information properly and making sure you
understand everything.
You should keep on
enquiring until you have a full understanding of all
details relating to the property
Do not buy without getting proper advice. This
should not be from someone who only has partial
knowledge or is not a specialist in the field.
Do not buy outside of your planned strategy just
because it looks lucrative – stick to the plan
Do not buy at the high end of a property cycles
Do not pay too much (i.e. not higher than 95% of the
true market value with all costs inclusive)
Our advice to those who invest in property – about their
safeguard in an unstable community
The only way that you can completely mitigate the risk of
the various cycles and influences in an unstable economy or
even political insecurity is to use uniquely structured property
investment opportunities. These opportunities should have a
proven track record for at least five or more years. For the last
30 years of property cycles in South Africa, indicate that they
would have withstood the stress test over this period and can
continue to withstand such tests.
Another method is to lower the risk for loss of capital is to
buy at the right price and thus purchase the larger part of the
return which provide a buffer for the various influences of an
unstable economy. Another way to deal with this issue, and
which has more application in the commercial and industrial
space, is to ensure that your lease is signed for longer terms
but at the same time to ensure that at least 65% of your
tenants are national tenants with reasonable yearly escalation
rates written into the lease agreements.
RESOURCES Property Assist
30
JULY/AUGUST 2019 SA Real Estate Investor Magazine